Postgraduate Education and Human Capital Productivity in Japan

In advanced countries, including Japan, the number of workers with postgraduate qualifications is increasing. These highly-skilled workers are important contributors to innovation. This paper, using published data from the Employment Status Survey, estimates standard wage functions to investigate the effects of postgraduate qualifications on productivity and the rate of return on postgraduate education. According to the analysis, wage premium for postgraduates relative to undergraduates is about 20% in Japan, which is comparable to the figures found in the United States and the United Kingdom. The premium is larger for female employees. Wage reduction after age 60 is smaller, and retirement age is higher for workers with postgraduate education. Under the trend toward advanced technology and the growing demand for human capital, postgraduate education is becoming important to vitalize the Japanese economy. At the same time, expansion of postgraduate education may contribute to narrowing the wage gap between male and female and increasing labor force participation of elderly people.